ECONOMY

Spending is held in check

spending-is-held-in-check

Greece’s primary budget deficit for the first seven months of the year was smaller than the revised projections made in July, despite the fact that the government spent over €6.3 billion in aid related to the Covid-19 pandemic.

Specifically, the primary budget deficit, which excludes payments on the country’s debt, stood at €9.077 billion, compared to the revised estimate of €9.602 billion included in the July report on the medium-term plan (2022-25).

The primary deficit is still higher than during the same period in 2020 (€7.463 billion). The medium-term plan forecasts a primary deficit for the whole of 2021 equal to 7.1% of the country’s gross domestic product (GDP), up from 6.7% in 2020.

The government managed to contain the deficit to below estimated levels, despite the fact that net revenue was €650 million short of the target, including a tax shortfall of €45 million. Also, the country had not taken into account a receipt of €644 million from the 2016 Agreement on Net Financial Assets.

The state spent over €6 billion to mitigate the economic effects of the pandemic. The heaviest expenditure was the reimbursement of prepaid taxes, which cost the state €2.726 billion. In second place was the special purpose payout to affected individuals and businesses, which came to €1.871 billion. Also, €715 million was paid to property owners as compensation for lost or frozen rents, €200 million was used to subsidize loan payments, €493 million was paid to small and very small regional enterprises hard hit by the pandemic, €104 million was provided by the Public Investment Program to subsidize the interest on loans made by small and medium-sized enterprises and the same program provided another €220 million for loan guarantees.

The total amount in pandemic aid for the first seven months of 2021 came to €6.329 billion.

A problematic part is the lower-than-expected revenues from the Public Investment Program. In July, revenue was only €90 million, compared to an expected €1.150 billion. A top Finance Ministry official said that this is partly due to a delayed payment from the EU. Also, tax revenue was €125 million short of the target, because of the extension to the deadline for filing tax returns.